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Cambodia

Payroll in Cambodia: Comprehensive Guide for Employers

Cambodia is a Southeast Asian country that has enjoyed rapid economic growth in recent years, owing largely to the expansion of its garment and tourism industries.

Cambodia has become an increasingly appealing place for foreigners wishing to establish enterprises in recent years, owing to its low cost of living, competent labor force, and a variety of incentives for international investors.

Cambodia offers a unique opportunity for entrepreneurs and investors looking to expand their operations in the area, with a stable political atmosphere and a government devoted to economic development.

How Is Payroll Calculated in Cambodia?

Payroll in Cambodia is calculated using the employee’s gross salary, the total amount paid to the employee before any reductions are applied.

The Cambodia payroll process includes the following steps:

Determine the gross salary

The total compensation given to the employee, minus any deductions, is shown here. The employer typically decides the gross wage according to the employment contract conditions.

Calculate income tax

The gross salary and the government-specified tax rate are used to calculate the employee’s income tax.

The payroll rules and regulations in Cambodia will change from January 1, 2023, with the government modifying the tax threshold from $194 to $200.

The new threshold for physical persons, sole proprietorships, and partnerships (for Cambodian residents) is in the table below:

New annual threshold

Tax rate (%)

KHR 0 to 18,000,000

0

KHR 18,000,001 to 24,000,000

5

KHR 24,000,001 to 102,000,000

10

KHR 102,000,001 to 150,000,000 

15

KHR Over 150,000,000

20

You will be subject to a flat 20% tax as a foreigner in Cambodia, which also counts as a final tax.

Calculate social security contributions

Businesses must contribute to the National Social Security Fund (NSSF) on behalf of their employees. The contribution amount is 9% of the employee’s gross pay.

The benefits or compensation that NSSF provides to members include:

  • Continuous attendance benefit
  • Medical care benefit
  • Nursing service benefit
  • Permanent disability benefit
  • Survivors benefit
  • Temporary disability benefit

Calculate other deductions

Other deductions include, for example, the cost of health insurance or retirement account contributions. Often, these deductions are described in the employment contract or collective bargaining agreement.

Determine the net salary

After all deductions, the employee’s take-home pay is the net salary.

Prepare and distribute payslips

Each employee receives a payslip reflecting their gross pay, deductions, and net pay when the employer has finished the payroll calculations.

It is essential to remember that companies must stick to the nation’s labor laws and regulations while determining payroll policies and procedures in Cambodia.

Employers must also maintain proper payroll deductions in Cambodia and regularly submit their data to the appropriate government agencies.

Important Elements of Salary Structure in Cambodia

Some of the important elements of the salary structure include:

Basic salary

This is the fixed amount paid to an employee for their work, exclusive of any additional benefits or allowances.

Allowances

These are payments made to employees in addition to their basic salary, usually to cover expenses such as housing, transportation, or meals. In Cambodia, common allowances include housing allowance, transportation allowance, and daily allowance.

Compensation/Minimum wage

Starting on January 1, 2023, the minimum wage in Cambodia stands at $198 per month for workers still in their probationary period and $200 per month for regular workers.

Overtime pay

In Cambodia, any amount of time worked beyond the regular daily working hours is classified as overtime, even if the total weekly hours worked are less than 48.

Overtime compensation is 150% of the regular hourly salary and 200% for night shifts.

Social security contributions

Social Security requires employers to deduct 0.8% of monthly payroll. It covers benefits such as healthcare, maternity leave, and pensions.

How to Set Up a Payroll in Cambodia

Companies looking to set up their payroll in Cambodia must start by registering with the Ministry of Commerce and receiving a certificate of incorporation and a license.

Other steps include:

  • Register with the General Department of Taxation within 15 days.
  • Obtain a tax patent and VAT certificate.
  • Visit the Ministry of Labor and Vocational Training and the NSSF if you plan to have more than eight local employees.
  • It may take three months or more to complete the registration process for your Cambodia payroll.
  • Establishing a subsidiary in the country is necessary before initiating any of the above steps.

A Step-by-step Process of Payroll Processing in Cambodia

Here is a step-by-step Cambodia payroll process, taking into consideration payroll policies and procedures, payroll deductions, and payroll tax rates:

  • Collect employee data: The first step to processing payroll in Cambodia is collecting employee data, such as personal data, job information, and remuneration data.
  • Determine gross salary: After collecting employee data, the gross salary is determined based on the employment agreement or contract.
  • Calculate payroll deductions: Payroll deductions in Cambodia include income tax, social security contributions, and other deductions such as retirement fund contributions or health insurance premiums.
  • Calculate net salary: When all deductions have been made, the employee’s net salary is how much money they receive. Take the gross salary minus all the payroll deductions to figure this out.
  • Prepare payroll reports: Employers are expected to maintain correct payroll records and create reports that include information on each employee’s gross pay, payroll deductions, and net pay.
  • Process payroll: After preparing the payroll reports, the employer can process the payroll, distribute paychecks, or pay employees digitally.
  • File payroll taxes: Businesses must regularly submit payroll tax returns and disclose their payroll information to the appropriate government agencies.
  • Maintain compliance: Employers should maintain compliance with Cambodia’s labor laws and regulations regarding payroll policies and procedures, payroll deductions, and payroll tax rates.

Payroll Contributions:

In Cambodia, both employers and employees are required to make payroll contributions to various government-managed funds. Some of the mandatory payroll contributions include:

Employer contribution

The table below shows the payroll deductions in Cambodia for employers. 

Payroll Deductions

Percentage

Maximum Amount (KHR)

Health Insurance

2.60%

N/A

National Social Security Fund

0.80%

1,200,000

Total

3.40%

N/A

Employee contribution

As of 2018, social security contributions are not deductible from employee salaries in Cambodia. 

Payroll Cycle

Payroll in Cambodia is processed monthly, with payments on the last working day of each month. However, laborers are entitled to receive payments at least every 16 days.

Cambodia Payroll Options for Companies

There are four different payroll options available for companies looking to expand their operations globally in Cambodia. These options include:

Internal payroll

Established businesses in Cambodia can use this payroll option. An entire HR team manages the company’s payroll operations.

Remote payroll

Small businesses operating in Cambodia require additional resources to manage their payroll effectively, but one option they can consider is adding their employees to the payroll of their parent company.

However, this approach requires careful consideration to ensure compliance with the payroll rules and regulations in Cambodia.

Local outsourcing

Local outsourcing might be a good choice for companies that need more knowledge or means of handling their payroll remotely or internally. 

Businesses can outsource payroll operations and guarantee compliance with Cambodia’s payroll regulations by working with a local payroll provider.

International payroll services

International payroll services can help major multinational corporations with operations in several nations optimize payroll procedures and guarantee compliance with local payroll laws. 

These services can offer knowledge in handling complex payroll laws and managing payroll across international borders.

Entitlement and Termination Terms

Businesses must create written employment contracts for each employee before hiring them, just like in any other country, as advisable.

The terms of employment, including all benefits like sick leave, holiday time, and maternity leave, should be clearly stated in the employment contract.

As for termination, it requires a probation period of 2 to 3 months for skilled/regular employees.

Termination Procedure

The termination procedure includes the following conditions:

Fixed-term contract

The employer may end the contract before its expiration date if both parties agree. If not, the employer may revoke an employment contract for counting errors or unanticipated events.

Indefinite contract

The initiator must provide written notice of the agreement, and the employer must notify the labor ministry. An employee can obtain a certificate for services rendered.

The notice period is stated in the table below:

Contract Type

Employment Duration

Notice Period

Indefinite

6 Months

7 Days

6 Months – 2 Years

15 Days

2-5 Years

1 Month

5-10 Years

2 Months

10 Years

3 Months

Fixed Term

6 Months

No notice

6 Months – 1 Year

10 Days

>1 Year

15 Days

Cambodia’s Labor Law was amended in 2019, replacing severance payments with ‘seniority’ payments for employees under unfixed duration contracts (UDCs).

Seniority payments of 15 days of wages and fringe benefits per year are paid to employees every six months.

Fixed-duration contracts (FDCs) require a severance payment of at least 5% of total wages due throughout the contract term. Failure to follow the set payroll policies and procedures in Cambodia can lead to fines.

Cambodia Payroll Processing Company

To maximize payroll policies and procedures in Cambodia, you have two options: manage it in-house or collaborate with a global outsourcing firm like Multiplier. 

To learn more about the payroll process in Cambodia, feel free to contact Multiplier.

How Multiplier Can Help With Global Payroll?

Establishing and managing a comprehensive Cambodia payroll guide can be challenging and time-consuming. It involves various aspects, such as designing, implementing, and maintaining the payroll process in your business.

These processes can take time and effort, hindering you from focusing on other vital aspects of your business.

By collaborating with Multiplier, you can eliminate these challenges. Our team is available round-the-clock to offer you the best payroll processing experience and help you run your business smoothly.

Frequently Asked Questions

Employers are required by law to offer their workers certain benefits, including paid time off for illness and other reasons, annual leave, public holidays, paid maternity leave, and social security contributions.

Employers in Cambodia can ensure compliance with Cambodian labor laws when managing their payroll by staying informed of any changes in legislation, consulting with legal and financial professionals, and keeping accurate records of all employee payments and benefits.

Employers in Cambodia have tax obligations such as registering with the General Department of Taxation, obtaining a tax patent and VAT certificate, and paying employee income tax and social security contributions.

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